Former New York Mayor Rudolph Giuliani may want to be the new chairman of WorldCom, but the job isn't necessarily his for the taking. On Nov. 18, Giuliani said: "This is an opportunity to make a positive contribution to WorldCom."
Maybe so, but directors of the bankrupt telecom company last week appointed former Hewlett-Packard President Michael Capellas chairman and CEO, and they aren't ready to change their minds, say company executives and creditors. "Of course, Giuliani is a great guy, and we'd love to have him on the board," says a creditor.
But sources say that having Giuliani in the WorldCom chairman's job is the fondest wish of distressed-bond investor David Matlin, who is trying to buy a third of WorldCom's $25 billion in outstanding bonds. Such a stake would give Matlin, 41, the right to appoint WorldCom board members and to influence its reorganization plan. So far, Matlin has accumulated about 10% of WorldCom's bonds, insiders say, so he doesn't have enough clout to get Rudy the chairman's job--not yet, anyway. With tension between the U.S. and Iraq causing jitters in the oil markets, the White House is considering raising fuel-efficiency standards for sport-utility vehicles and light trucks. Administration insiders say the latest proposal is to boost fuel efficiency by about a half-mile a gallon each year for the 2005-07 models. Right now, the average fuel economy for a fleet of vehicles sold by each auto maker must be 20.7 mpg for SUVs and light trucks.
While a final proposal won't be issued until April, 2003, the Alliance of Automobile Manufacturers says meeting the suggested requirements will be a "real challenge." Environmentalists, meanwhile, denounced the proposal as too small. According to the National Environmental Trust, the proposal would only save 2.8 million barrels of imported oil in 2005, well below the 206 million barrels of oil imported each year from Iraq. Paul Allen's Charter Communications (CHTR), already under investigation by a federal grand jury, disclosed that it's cooperating with an informal Securities & Exchange Commission probe "related to its disconnection of customers." The St. Louis-based company said it would restate $1.2 billion in tax liabilities and $1.4 billion in franchise costs related to 18 companies acquired in 1999 and 2000. The debt-strapped company said the restatement will not disrupt its plan to generate free cash flow by late 2003. Last month, Charter said that it had put its chief operating officer on paid leave, pending the resolution of the grand jury investigation into its accounting practices. Housing is finally showing some cracks. On Nov. 20, the Commerce Dept. reported that housing starts fell 11.4% in October, to an annual rate of 1.6 million. But most of the decline occurred in the volatile apartment-building category. According to the National Association of Home Builders, home sales and buyer traffic picked up in November. Even with the October decline, starts are still likely to reach 1.67 million, making 2002 the best year since 1986, when home starts hit 1.81 million. Outrage over questionable accounting at Enron sparked concern that its auditor, Arthur Andersen, may have turned a blind eye to accounting irregularities in order to win consulting business. Now, the SEC aims to thwart such conflicts of interest. On Nov. 19, the commission proposed new auditor-independence rules as required by the Sarbanes-Oxley corporate reform law enacted in July. But the suggested SEC rules go beyond what the law mandates. They would bar an accounting firm from paying audit partners for consulting work that the firm does for companies the partners audit. When Charles Wang, one of the software industry's legends, finally called it quits on Nov. 18, he left his handpicked successor, Sanjay Kumar, with a mess on his hands. Computer Associates International (CA), the company Wang co-founded in 1976, is being investigated by the federal government for accounting issues. Kumar has been CEO for two years and now picks up the chairman title. In September, he handed the government an audit by PricewaterhouseCoopers that he says vindicates CA. Unless Kumar makes the investigation go away, his stock won't go anywhere. It's trading at about $15--way below the $30 it fetched before the feds barged in last February. -- Diageo (DEO) failed to sell Burger King for $2.26 billion to a consortium that included Texas Pacific Group.
-- Hewlett-Packard (HPQ) earned $390 million on $18 billion in sales in its fiscal fourth quarter.
-- United Airlines (UAL) won wage concessions from its machinists, clearing the way for government loan guarantees. Shares of Home Depot (HD)tumbled nearly 13% on Nov. 19, to $24.91, after the retailer said that third-quarter sales at stores open at least a year slipped 2%. Customers are being scared off by disruptive renovations that Home Depot is doing to compete with Lowe's. Analysts also fret that the home-renovation boom is coming to an end.